Are you trying to find a deal on real estate? With the housing market so hot these days (see the national housing trend below – the market is obviously even hotter today!!), it can seem almost impossible to find a deal on real estate, but no matter how hot the market may be, there are still plenty of ways to find yourself a deal.
10 Ways to Find a Deal on Real Estate
Some people walk through a house and everything has to be pristine for them to even consider purchasing it. This is most certainly NOT how to find a deal on real estate. So how can almost anyone find themselves a deal? Check out these 10 methods and you’ll likely save thousands of dollars on your next home purchase.
#1. Find a Quality Realtor
As a buyer, you can hire yourself a realtor and pay absolutely nothing for their services. This is because their commissions always come from the seller (both the seller’s agent and the buyer’s agent split the commissions from the seller when their home is sold). But, just because your realtor is more or less “free” for you to use, this doesn’t mean that you should just settle for the first realtor that you come across.
Instead, ask your friends who they have hired for a realtor and see if they’ve been satisfied. Beyond this, check their status on sites like Zillow.com to see if they’ve been reviewed and how active they are in the real estate world. If they make minimal sales and have no reviews, you might need to move on.
If you’re trying to find a deal on real estate, you want to be sure that your realtor is constantly in the game and can find homes without relying on the MLS listings. If they are networking and are in constant contact with other realtors, they’re likely the ones that will find you your deal.
#2. Watch the Listings Every Day
Have your realtor set you up on the MLS mailing list. They can enter in your criteria of price, bedrooms, and bathrooms, and have those listings sent to you automatically when they come on the market. Just watch your phone for new emails and you could be one of the first to jump on that property that’s perfect for you.
#3. Check the Price Drops
There are some homes that are better than any others and their owners know it, which means that their price holds firm for many days and maybe even months. Eventually, they get their asking price and happily accept.
There are others though that don’t have the luxury of setting a price and waiting for that perfect buyer to come along months down the road. They might be hard up for money, they might have moved out of state, or maybe they’re heirs to the estate and just want to sell the property quickly so they can divvy up their inheritance.
Whatever the case may be, if you see one price drop (or more), then you may have found yourself a potential deal.
Liz and I recently found a house that was initially listed for $120,000. After 10 days, the price dropped to $110,000. After another 15 days, the price dropped to just $95,000! This family was obviously urgent to sell. With the price dropping that fast, they might even accept an offer of $80,000, even though the house is probably worth over $100,000.
If you want to find a deal on real estate, keep your eye on the price drops.
As I stated early on in this post, there are some people that are looking for a home that’s completely done and move in ready. They’ll never find a deal this way. If you want to find a deal on real estate, then you’ll need to have some vision. The ideal house is the one that has a solid roof, good siding, and a firm foundation. The rest of the house might be painted pink and have pee stained carpet, but you know what? That’s replaceable and fairly inexpensive. By rolling up your sleeves and adding some paint and carpet, you could probably add $20,000 of value to the house for about $2,000. If you want to find a deal on real estate, find the ugly houses that have good bones. You can’t go wrong with them.
#5. Spot Foreclosures, HUDs, and Short Sales
Foreclosures, HUD homes, and Short Sales are all basically the property of the bank, and this might mean a deal for you. Don’t be fooled though, not all bank owned homes are deals. Some are priced according to the market if the bank doesn’t mind holding onto the property for a while (and some really don’t mind, so long as it earns them some extra money by doing so).
What you want to know is if the bank is willing to give you a deal.
Foreclosures are hit or miss. They might be a deal or they might not be. If the house is 200 miles from the bank that owns it, then they’ll probably be more willing to haggle on the price so they don’t have to deal with it. If, however, the bank is in the area and the housing market is hot, then they’ll likely price it according to the market and still sell it in a reasonable amount of time. The bank isn’t stupid. Just because they’re selling a house doesn’t mean that you’ll get a steal of a deal every time.
HUD homes are from owners that have defaulted on their FHA loans. These houses are often much cheaper than the market, but there is a catch – you have to physically live in the home for a full year after the purchase. In other words, these homes are not intended for investors, only primary home owners. So, if you’re looking for a deal on your main residence, then you may want to keep your eyes peeled for a HUD home in your area.
Short sales can be a pain in the butt, mainly because there are three entities involved: the bank, the seller, and the buyer. The seller has defaulted on their loan and can’t afford the house. In an effort to save their credit, they partner with the bank to try and sell their home. If they succeed in a sale, their credit is dinged a bit, but they owe nothing to the bank, even if the sale was below the amount they owed. As a buyer, these purchases can take quite a while because the seller just wants out of the house and will likely list it at a ridiculously low price, while the bank wants to get as much money out of you (the buyer) as possible. So, your initial offer might get considered, but you have to wait for a solid month to hear anything, and they then counter. You provide a new offer which takes another month…etc. etc. The process takes a while, but if you have the time, you can still end up with a quality house at a low price.
Have you ever walked past a home that looked to be in complete disarray? The lawn is a foot high, there are weeds growing everywhere, and there might even be boards on the windows. This house is screaming, “Buy me for a deal!” The only problem is, there is no For Sale sign in the front yard, so how can you get in touch with these people to see if they want to sell their house?
Every home owner pays property taxes, which means that every house has registered information with the city where it resides. All you have to do is:
- punch the address of the home into your city’s database
- click on the parcel number next to the address
- and find the name of the owner (as well as many other interesting facts about the property)
This can easily be done with any property that interests you. From here, you can either send a hand-written letter to the address listed in the database (sometimes the owner has a different address than the actual home that you spotted), you can walk up to the property and try to speak with the owner, or you can find their home phone number through the white pages (since you now have their full name). They might not be at all interested in selling their home, but for the ones that have considered it, they might just give you a screaming deal so they don’t have to mess with a listing, a realtor, or the price haggling. This might just be your ticket to finding a deal on real estate.
#7. Visit the Pre-Foreclosures
This option will take some major guts, and to be honest, I’ve never done this. But, when you look at homes on Zillow or Trulia, you have probably already seen homes that are listed as a pre-foreclosure, which means that they probably missed a payment and are trying to catch up to remain current with their bank. Some of these pre-foreclosure listings may be a complete mistake and others could already be resolved, but a handful of them might be drowning in missed payments and are looking for a way out.
The best way to approach a pre-foreclosure owner is to knock on the door, mention that you love their home, and ask if they’ve ever thought about selling. You really never need to tell them that they’re nearing foreclosure if you don’t want to – they probably know that already and they might be thrilled to see you, a potential buyer, that could free them from their current nightmare. This might just be your ticket to find a deal on real estate. It’s never easy, but it’s certainly an effective option.
#8. Look For What Could Be
A house may be listed as a 2 bedroom, 1.5 bath and priced accordingly, but could it be more? There are quite a few 1.5 story homes in my area that are listed as a 2 bedroom home – one on the main level and the upper area is a large master. But, instead of a large master bedroom upstairs, many times these upper areas can easily be converted into two bedrooms, which quickly turns the home into a 3 bedroom home. The same is true for bathrooms. Perhaps that half bath can pretty easily be converted into a full bath, thus creating a much more valuable home.
With this option, you aren’t necessarily getting a deal on real estate when you purchase it, but you can pretty easily transform it into a much more valuable home, thus creating equity soon after you sign the deal.
The typical home inspector walks through a house and lets you know what’s not up to par with it. They hand you the paperwork for your review, and their job is done (as they hold out their hand for their $300). This type of home inspector is a dime a dozen. Avoid them. They aren’t worth the money.
What you want is a home inspector that will ensure that you’re getting a deal on real estate. Not only should they be pointing out potential hazards in the home, but they should also provide solutions and the likely cost for these solutions. Find a home inspector like this and you’ll be more likely to find a deal on real estate as you’ll be aware of all the issues and future costs of bringing the house back to code.
#10. Flash Some Cash
Finally, you can more easily find a deal on real estate if you have some cash to flash. Since it still isn’t easy for many to get approved for a loan, sellers that know you have cash are more likely to flex on the price (since they know the deal will go through, and will go through more quickly and smoothly than someone that has to dicker with the bank for the money). When you’re ready to make an offer, simply let the seller know that it’s a cash offer. Even though your bid might be slightly lower than someone else’s, it might just be selected, which means you’ll get yourself a deal!
What other ways can you find a deal on real estate? Did I miss any? Be sure to comment below!
My name is Derek, and I have my Bachelors Degree in Finance from Grand Valley State University. After graduation, I was not able to find a job that fully utilized my degree, but I still had a passion for Finance! So, I decided to focus my passion in the stock market. I studied Cash Flows, Balance Sheets, and Income Statements, put some money into the market and saw a good return on my investment. As satisfying as this was, I still felt that something was missing. I have a passion for Finance, but I also have a passion for people. If you have a willingness to learn, I will continue to teach.